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Except that a Purchase Order and Invoice aren't interchangeable in accounting terms. A Purchase Order is the customer saying "I want to order the Big Mac Meal"

Except that a Purchase Order and Invoice aren't interchangeable in accounting terms. A Purchase Order is the customer saying "I want to order the Big Mac Meal". An Invoice is you saying "That will be $5.95 please". A cash accounting system is essentially giving the option back to the customer (from your perspective at least) of being able to walk out the door. An accrual system does not, as the inference is there that you will chase them to pay. You would usually use the former if there is the ability to dispute the invoice (i.e. it is linked to a delivery of a specific product) because you don't want to be paying taxes on income that you may or may not receive. You can use the latter more effectively if there is an expectation of payment, (like a SasS contract) because it is simpler overall.

gte910h 17y ago
>A cash accounting system is essentially giving the option back to the customer (from your perspective at least) of being able to walk out the door. An accrual system does not, as the inference is there that you will chase them to pay. Having been in both situations, I disagree with this summary. You write down the bad debt in the situation of the unpaid AR in accrual, in cash, you close the invoice however you wish to do so. It's not like you stop tracking invoices in cash based accounting or who owes you money. The real big deal between accrual and cash is "control of large expense timelines" which you can pick which date you add them in when doing accrual, and you can't when you do cash. If you do a lot of business that falls over the end of your fiscal year (not a problem in my part of the woods) this can be an issue. Most of the rest of the changes are just changes in amount of paperwork.